Social impact bondsPresentation to Human Services Partnership Forum

Stuart HockingEconomic Analysis

Department of the Premier and Cabinet

29 July 2014

Why social impact bonds?

“A prudent Government needs to be sure that public funding for community services is

used effectively, to achieve the best outcomes for individuals and the community.

We also need to focus more attention on early intervention programs which can

prevent expensive social problems emerging.”

Impact investment

Commercialinvestment

Impactinvestment

Philanthropy

Social Impact Bonds: the basics

Investors

GovernmentService Provider

Service Users

1

5

2 6

3 4

1. Government enters outcomes contract to pay on the basis of outcomes

2. Investors provide upfront capital to fund the provision of services

3. Service provider (charity / social enterprise) delivers service to service users

4. Service delivers improved outcomes and savings to government

5. Government pays if and when outcomes are achieved according to the outcomes contract

6. Outcomes payments provide investors with a return

ExamplesYear SIB Location Target Problem Outcome measures

2010 Peterborough (£5m) UK Recidivism Reconvictions in 12 months following release

2012 Essex (£3.1m)London (£2 m)DWP (£10m)Rikers Island ($9.6m)

UKUKUKUSA

Out of home careHomelessnessDisadvantaged youthRecidivism

Days in OOHC post referralReduction in rough sleepingEducation & employmentDays in jail after initial release

2013 Its All About Me (£2m)NY State ($13.5m)

Utah ($7m)

Newpin ($7m)BenSoc ($10m)

Buzinezzclub (€0.7m)

UKUSA

USA

AustraliaAustralia

NED

AdoptionRecidivism & employmentEarly childhood educationOut of home careOut of home care

Youth unemployment

Placements for children in careEmployment for at-risk formerly incarcerated individualsReduced use of remedial servicesFamily restorationsReduced entry, reports & assessmentsEducation and employment

2014 Manchester

Massachusetts ($18m)Sweet Dreams ($1m)Duo for Job (€0.4m)

UK

USA

CanadaBelgium

Out of home care

Juvenile justice

Out of home careUnemployment

Placements for 11-14 yr olds in care of local authorityNumber of days incarcerated (at risk youth)Reduced entry into OOHCEmployment for recent migrants aged 18-29.

How does a social impact bond work?

Status quo With social impact bond Potential cost saving from social impact bond

Cost to gov-ernment

Cost to gov-ernment

Cost of interven-tions

Investor return

Public sector sav-ing

Savings retained by government

Impact of SIB

$

Payments by government

How does a social impact bond work?

time

co

st

expected costs of 'do nothing' scenario (the 'counterfactual')

historical costs costs following a successfulintervention

Payment bygovernment

Saving to govern-ment

Potential benefits• Successful interventions deliver better

individual and community outcomes• Investment model imposes discipline of

accountability for results• Private sector injects up-front capital to

allow NGO to make investments• Helps to support the new field of impact

investing

Challenges• Understanding costs and establishing the

counterfactual• Tracing the benefits (costs reduced or

avoided) and where they accrue• Attributing outcomes to the intervention• Choosing the right outcome measures• Scale of intervention required to make a

difference

Focus areas• Preventing out-of-home care placements• Reducing recidivism• Preventing unnecessary RACF transfers

to emergency departments• Homelessness• Others??

Progress to date in SA• Social impact investment products advisory

committee

• Discussion paper, Dec 2013Building a stronger society:(over 50 submissions received)

• Stakeholder forum, Feb 2014

• Refine focus areas and target cohorts

• Capacity building workshops, July-August 2014

• Expect EOI later in 2014